Which is better - Line of credit or reverse mortgage?

Guest

My mom, 79, owns her home free, the house worth $540,000. I recently visited her and was shocked to see the condition of her house. The roof leaks and there was the smell of the mold. Finally she admitted that she has outlived her assets, except for the social security and the pension. I suggested a reverse mortgage, but she says her banker recommends a home equity line of credit pay for the new roof and other repair work. She wants to stay in her house especially because she likes the neighborhood and the surrounding areas. What option do you think is better?

Guest

I will recommend the reverse mortgage, as it has got so many benefits and its meant for old people.

refer this for all kind of benefits you will get out of reverse mortgage - http://www.mortgagefit.com/reverse.html

You can also do a comparative study of how it is better then other loans
http://www.mortgagefit.com/compare-reverse.html

Thanks

colin

Hi Tyler,

Welcome to the forum

The home equity line of credit requires paying monthly installments of at least the interest only part. Since your mom lacks a good source of income, so I believe this option will not work out much. Rather suggest her that a reverse mortgage will be better. But there are huge up-front fees and one should stay in her home for at least 5 years if she wants to make up for the costs by getting the loan advances.

Thanks.

jerry · Posted: Sun Jul 02, 2006 4:37 am Post subject: RE:

Hi,

The reverse mortgage can help in times of financial problems. Your mother can use a part of the loan advances for the repair work, and for any kind of big purchase and the rest can be obtained as a credit line or lifetime monthly income. So this is the a better choice compared to an equity loan.

Thanks,
Jerry.

ckalvesmaki · Posted: Sun Jul 02, 2006 9:04 pm Post subject:

Your mother can take cash in a lump sum as well as recieve income payments. The fact that the banker recomended a line of credit is rather selfish and uncaring. The reason the banker made the recomendation is because he or she probably can't do a reverse mortgage or doesn't understand how they work

Guest

I have a reverse mortgage and am taking the funds by line of credit. The balance in the line of credit is over $100,000. I'm concerned that the bank may stop funding the line of credit. I know they can do this on a regular line of credit. Can they stop funding a Reverse Mortgage Line of Credit?

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.77 Dollars($)

Thats quite possible, when they figure that the risks for them is too high.

Lot of banks are cutting the Linf of credit for so many cosumers based on their payment history and credit score.

You have heard in the news, how banks are doing and how many people are gettign approved for a new loan.

loanlitigators · Joined: 18 Feb 2009 Posts: 6 2.68 Dollars($)

With a reverse mortgage, it's possible to withdraw roughly half the value of your home.

A 70-year-old owner of a $200,000 house, for example, could take out $113,000 at today's rates or opt for a $700 monthly payment for life. You don't need good credit, a high income or ample savings to qualify.

jenkin7 · Posted: Thu May 07, 2009 11:18 pm Post subject:

Hi Eugene,

A reverse mortgage line of equity is not same as a regular line of credit. For instance, unlike a regular line of credit, no interest is charged on the unused portion of your reverse mortgage line of credit. When you obtain a reverse mortgage, you enter into an agreement with the lender. Thus, I don't think the lender can stop funding your line of credit all on a sudden, because that would be against the terms of the agreement that you signed. By the way, is it an FHA-insured Home Equity Conversion Mortgage that you have?

gmakerley · Posted: Fri May 08, 2009 8:05 am Post subject:

that's an interesting line of questioning here. home equity lines of credit are, after all, an agreement between borrower and lender also. that doesn't stop the lenders from taking action when they feel less secure.

i am becoming more and more skeptical about the value of reverse mortgages, however; particularly in this economy. except for the cases in which people can take a monthly stipend to supplement whatever other income is coming into a household, i believe there's way too much danger for a borrower who gets involved in a reverse mortgage. lately, we've seen some pretty disastrous situations resulting from these loans.

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.77 Dollars($)

George,

Can you share some of the disastrous you have seen. It will be good for every one toknow the good and bad side of everything.

Thank you,

gmakerley · Posted: Sat May 09, 2009 6:03 am Post subject:

honestly, the best example is one a colleague of mine is working on now. a lady had no mortgage at all 4 years ago, borrowed $150K on a reverse mortgage. she took about $25000 in cash and the rest stayed on a line of credit. who knows what happened, but she subsequently refinanced and suddenly owed about $185000.
next up, she refinanced again (now these are ALL reverse mortgage transactions), and the loan is now up to $248000. equity has been eaten up, and she sits at home now with no lights (shut off), no phone (shut off) and no health insurance (canceled due to non payment). she doesn't have enough income to live on and doesn't know where to turn.

she's 74 years of age. obviously she got caught by a loan officer or two who saw a chance to make money and probably didn't see the long range effect on this woman's life. i'm not trying to say anyone was shady, but we in the lending field need to be cognizant of what effect these loans will have on people - especially those who are not particularly sophisticated financially.

the loans are expensive to begin with - imagine what refinancing did to her, what with paying closing costs, points, etc.

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.77 Dollars($)

Wow that is really a terrible story.

Folks be careful and this story is really heart breaking.Especially when some one at age 74 is being literally been dragged in to some thign which they cannot get out.

I am sure there are enough good loan offers around, but some times you want to extra cautious ( 200%) before you sign on something.

Good luck every one.

raymond · Posted: Fri Jul 03, 2009 10:16 am Post subject:

>>Can they stop funding a Reverse Mortgage Line of Credit?

No. That's where you insurance comes in. You paid a stiff premium when you got the Reverse Mortgage, and you're also paying .5% per year on the outstanding balance, and the insurance is what enables the mortgage to remain stable and unaltered as long as your home is your primary residence.

raymond · Posted: Fri Jul 03, 2009 10:23 am Post subject:

>>Thus, I don't think the lender can stop funding your line of credit all on a sudden, because that would be against the terms of the agreement that you signed.

I didn't think they could do it either, until it happened to me. Last year I received a letter that thanked me for my on-time payments and informed me I no longer had access to the remaining portion of my credit line. I told my peers about it and it started happending to them too.

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